Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease...

50.1K

Verified Solution

Question

Finance

Your firm is considering leasing a new computer. The lease lastsfor 9 years. The lease calls for 10 payments of $1,000 per yearwith the first payment occurring immediately. The computer wouldcost $7,650 to buy and would be straight-line depreciated to a zerosalvage value over 9 years. The actual salvage value is negligiblebecause of technological obsolescence. The firm can borrow at arate of 8%. The corporate tax rate is 30%.
What is the NPV of the lease relative to the purchase?
-$1,039.78
$339.78
$360.22
$6,610.22
None of these

Answer & Explanation Solved by verified expert

3.7 Ratings (478 Votes)

Solution The NPV of the lease relative to the purchase is 33978Thus the solution is See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Your firm is considering leasing a new computer. The lease lastsfor 9 years. The lease calls for 10 payments of $1,000 per yearwith the first payment occurring immediately. The computer wouldcost $7,650 to buy and would be straight-line depreciated to a zerosalvage value over 9 years. The actual salvage value is negligiblebecause of technological obsolescence. The firm can borrow at arate of 8%. The corporate tax rate is 30%.What is the NPV of the lease relative to the purchase?-$1,039.78$339.78$360.22$6,610.22None of these